Election May Impact Near-Term Action in Gold & Silver / Commodities / Gold & Silver 2020
Metalsbroke out earlier in the year because there has likely never been so manyfundamental reasons to buy gold and silver.We’ve seen economic turmoil, political strife, social unrest, a $3 trillionfederal deficit, and a dollar weakened by fiscal and monetary stimulus – allhappening at once.
Howthe markets finish the year will depend on whether these conditions persist.
Thenear-term bearish scenario for metals would probably have something in commonwith 2016. Donald Trump wins and investors feel more confident.
Theycould focus on buying risk assets, and they could be less motivated to buysafe-havens assets.
Thistime around, however, the election is not likely to put an end to uncertainty.The far left would have to accept a Trump victory without erupting intowidespread social unrest, and the fear surrounding COVID would need to subside.
Insuch an environment, the equity markets could rally, and the Fed may not haveto inject more monetary methadone. Investors could rationalize thatmulti-trillion-dollar deficits and widespread unemployment will diminish.
Thenear-term bear case for precious metals hinges on the restoration of generalinvestor confidence. If they can see 2021 being a better year, then demand forphysical metal could wane, as it did after Trump’s first victory four yearsago.
Thebull case for metals lies in continued, or escalating, uncertainty. Gold and silver investors will be highly motivated should JoeBiden win the election. They will anticipate higher taxes, more economycrushing lockdowns, and even more debt funded bailouts and spending.
Regardlessof the outcome, Americans could become even more polarized as social unrest escalates.
Aneven more contentious debate on how to respond to the ongoing COVID pandemiccould ensue. A President Biden would lead the effort to close more schools andbusinesses and further limit gatherings using the heavy hand of the federalgovernment.
Inthis scenario, the recovery narrative falls apart. Investors accept thenation’s economic plight is not good and likely to worsen. The conventionalmarkets begin reflecting a darker reality. The Fed responds with the next roundof stimulus, even more massive than the last. The dollar weakens and preciousmetals surge.
Theelection results are one key variable in forecasting how gold and silvermarkets might finish the year. Right now, the prediction markets, and thepolls, point to a Biden victory. But the pollsters weren’t even close tocorrect 4 years ago.
Thenext couple of weeks should be exciting, one way or another.
By Clint Siegner
Clint Siegner is a Director at MoneyMetals Exchange,perhaps the nation's fastest-growing dealer of low-premium precious metalscoins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon,puts his experience in business management along with his passion for personalliberty, limited government, and honest money into the development of MoneyMetals' brand and reach. This includes writing extensively on the bullionmarkets and their intersection with policy and world affairs.
© 2020 Clint Siegner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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